Mohammed launches Second Market

His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, has launched the Second Market in the UAE financial markets.

This came after Sheikh Mohammed was briefed on the project submitted by the Securities and Commodities Authority in this regard, whereby he directed that trading should begin over the next few months.

The announcement was made when Sheikh Mohammed received Sultan bin Saeed Al Mansouri, Minister of Economy and Chairman of the Board of Directors of the Securities and Commodities Authority, and Abdullah Al Turifi, Chief Executive Officer of the Authority, who made presentations on the project objectives, stages of completion and positive impact on the financial markets and the national economy.

Sultan bin Saeed Al Mansouri said that Sheikh Mohammed’s approval for the launching of the Second Market reflects the foresight of the UAE's wise leadership and the latter’s recognition of the significance of both the public and the private joint stock companies in building the country’s economy and in teaming up with the government to achieve sustainable development, adding that with their resources and experience, these companies contribute immensely in development programmes and this means that their welfare and good performance reflect on the country’s welfare and good performance, in general, including the financial markets.

"The launching of the second market, which is solely for trading of shares of private companies, is part of the SCA’s comprehensive strategy aimed at achieving leadership in developing the financial markets and in contributing to the development of the national economy according to the best international standards and practices, in line with the objectives of the UAE’s Vision 2020 and in enhancement of UAE’s competitiveness in various international indicators, reports and podiums," he said.

The minister pointed out that the listing of private joint stock companies on the local financial markets would provide a platform for listing of similar firms in member countries of the Gulf Cooperation Council (GCC) and other Arab countries in the future, to reflect better on the national economy.

Abdullah Al Turifi said that he expects the Second Market to add more value to the market, the companies and the investors alike. He said, based on its development strategy and policy, that the SCA, in collaboration with the financial markets in the country, has completed preparations for the successful launch of the Second Market, following the issuance of a special regulation in this regard by the SCA board to ensure an advanced investment and legislative environment that contains rules and guarantees which provide protection for investors and meet the latter’s requirements, adding that this reflects on the development of stable and attractive environment for investment on the capital market.

Al Turifi said the listing of private joint stock companies on the local markets will provide opportunity for trading of shares of those companies in advanced environment and with modern electronic systems and greater financial information accessibility for investors. "This will provide means of interactions between the forces of demand and supply, thus achieving better pricing for the companies and protecting ownership in a better way through the protection of stock records at the Clearance Department, which facilitates the easy transfer of these record whenever a company wants to convert to a public joint stock firm," he added.

Explaining further, Al Turifi said the listing of private joint stock companies on the local markets will help those firms face effectively the problems of finance which unlisted companies cannot handle, thus beefing the capability of these companies to enable them play effective role in economic development.

The Second Market concept hinges on the listing of stocks of private joint stock companies on a market set up inside all the markets in the country, where there will be trading, clearance and settlement operations on a separate screen other than the official screen of the main market. The Second Market is open for all local companies as well as for companies from the GCC and other Arab countries.

Some of the significant benefits of the project include the fact that the market provides better and more effective supervision mechanisms for combating money laundering, as well as for implementing corporate governance criteria. The market is also regarded as a stepping stone towards the floating of an IPO in the future. Furthermore, it will make comprehensive information about companies accessible to investors to help them make informed investment decision.

The SCA conducted a study on best international practices on the Second Market by studying a number of advanced international markets in Europe and the USA, including the London Stock Exchange and other similar markets in Singapore, Malaysia and Hong Kong.

A committee, comprising the SCA, the Abu Dhabi Stock Exchange and the Dubai Financial Market, was set up to coordinate efforts to draft a regulation for a Second Market in collaboration with a consultancy firm. The committee invited inputs from other concerned bodies through the organizing of forums and conducting of surveys through which the SCA received some observations which were taken into consideration during the preparing of the draft regulation which was later approved by the SCA board.

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